With Asia the engine of a global race to net-zero, this could be a $5 trillion opportunity in the making
Over the course of millenia, humankind has evolved, and so too has our planet’s climate as our needs grew. We can see this manifested in so many ways, such as rising average temperatures, unseasonal climatic behaviour of an acutely hazardous nature (such as rising sea levels and droughts), and heat patterns that were previously unseen, often for decades. In fact, a survey conducted by the World Economic Survey found that on average across 34 countries, more than half of all adults surveyed (56%) felt climate change has already had a severe effect in the areas where they live. More than seven in ten (71%), including a majority in every single country, expect climate change to have a severe effect in their regions over the next ten years. One-third (35%) expect to be displaced from their homes due to climate change by 2047.
“We are in a climate crisis. The survey results affirm that across the world, people already feel the effects today and fear for their futures tomorrow. The crisis affects everyone. We have to work together, to adapt to climate change, and concurrently, accelerate and scale action towards a healthier, greener, and more sustainable planet. We need a holistic and systems approach, involving all stakeholders – governments, businesses, and civil society – to co-create solutions and effectively respond to this crisis.”
–Gim Huay Neo MD, Head of the Centre for Nature and Climate, World Economic Forum
This will doubtlessly impact not just our physical environment, but also socioeconomic and business environments, calling for concerted action between the private and public sector to achieve net-zero ambitions and reduce Greenhouse Gas (GHG) emissions by 2050.
Technology climate to achieving this goal, helping to pursue carbon-free energy, and helping build green businesses. And therein lies the green shoots of an opportunity waiting to be unearthed.
Asia’s sustainable business opportunity
With ESG considerations coming to the fore, experts estimate that approximately $9.2 trillion will have to be spent on physical assets for energy and land-use systems every year to achieve net-zero targets by 2050. Of this, $3.1 trillion will need to be spent in Asia, with the region responsible for more than half of global CO2 emissions since 2019.
Measures have been taken to mitigate this; more than 670 companies across the Asia-Pacific region have committed resources to reducing emission targets, creating new investment opportunities in green technology. With a strong history of building rapidly to meet the demands of a new world order (from 2004 to 2019, 53% of global infrastructure spend was in the region), one can be optimistic about Asia’s ability to build a greener future, creating a market opportunity for Asian green businesses worth between $4 trillion and $5 trillion by 2030.
Sustainability is a matter of increasing importance for all internal and external stakeholders, which is why many businesses are turning to building green business to meet expectations and outperform competition. For instance, the Adani Group, announced an investment of $70 billion in green energy transition and infrastructure projects in July 2022, which includes the development of 45 GW of renewable energy production capacity. A month after that, Reliance Industries announced a plan to set up a fifth giga factory for power electronics. The company will begin transitioning to green hydrogen by 2025, and aims to expand its solar manufacturing capacity to 20 gigawatts by 2025 for its own consumption.
That’s just the India context, with many more similar stories playing out across the Asia-Pacific region. China has ambitious plans to boost the development of strategic emerging industries such as renewables, electric vehicles, artificial intelligence and industrial robotics, with the country leading in the renewables production space. Investments in sustainable aviation fuel are also on the rise, as oil and gas companies look to hedge their bets by investing in renewable energy. Over in Singapore, engineering services company, Neste, has invested around $1.4 billion for production expansion in the island nation, resulting in 30% of its renewable production capacity being Asia-based.
In it to win it
With a raft of opportunities emerging in the race to attain net-zero, businesses can pursue one of several routes to create value for industries and society.
For one, green business builders can look at changing the way humanity moves, because transport accounts for roughly one-fifth of global emissions. Vehicle electrification could contribute 10 to 15 percent of the abatement potential needed by 2050, lowering emissions by roughly six gigatons of CO2 equivalents (GtCO2e). By 2030, EVs are expected to make up 60% of global passenger car sales, with Asia’s market size for EVs worth up to $750 billion, making it the largest market for EVs.
Businesses can take advantage of manufacturing incentives to enter the market themselves, such as Ola, Aether, or Hero. Another route could be to leverage Asia’s market and natural resources to become global leaders in electric-vehicle OEM or battery producers, which is expected to increase by 15 times to 4,500 GWh by 2030. And with the market of EV components (such as wiring, e-motors, and inverters) is growing at 40% per annum, it is an opportunity too good to ignore. The possibilities are limitless.
The demand for low-emission power sources could also be one worth looking at, with Asia uniquely positioned to make the switch away from fossil fuels. The Asia-pacific region has almost half (45%) of the global share of installed renewable energy capacity, with China alone boasting thrice the energy production from renewable energy sources as compared to the second-largest country, the United States. India too is active on this front, projected to add approximately 25 GW of renewables capacity annually through 2030, with Reliance Industries announcing investments of $80 billion in green energy. Similar to EVs, organisations dealing in related equipment, storage hardware, and related services could ride this wave of growth.
Hydrogen is another opportunity ripe for the picking, with global hydrogen demand expected to increase fivefold by 2050. With the share of grey hydrogen expected to be just 5% of the market by 2050, green hydrogen is an arena worth exploring, which explains why Reliance Industries is shifting away from grey hydrogen, and is pivoting to capture the entire value chain of the green hydrogen economy. As technology matures, a drop in cost from the current price of $4-$6 per kg to $1-$1.5 per kg by 2050 make this a massive opportunity in the making.
The Asia-Pacific region is expected to constitute 50% of global hydrogen demand, worth about $400 billion. Various factors put the region in pole position to serve demand, such as abundant renewables at a reasonable price and low-cost yet high-end manufacturing capabilities for hydrogen production and supply equipment. Whether as hydrogen producers, OEM providers to the entire value chain, or as infrastructure players across hydrogen operations, the opportunities in hydrogen are aplenty.
These are but a few of the green growth trajectories on offer. Opportunities abound, and as momentum behind green investments increases, the time to invest and create value is now, with this early move set to separate the leaders from the laggards.